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Robustness of Fourier estimator of integrated volatility in the presence of microstructure noise

  • Mancino, M.E.
  • Sanfelici, S.

The finite sample properties of the Fourier estimator of integrated volatility under market microstructure noise are studied. Analytic expressions for the bias and the mean squared error (MSE) of the contaminated estimator are derived. These formulae can be practically used to design optimal MSE-based estimators, which are very robust and efficient in the presence of noise. Moreover an empirical analysis based on a simulation study and on high-frequency logarithmic prices of the Italian stock index futures (FIB30) validates the theoretical results.

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File URL: http://www.sciencedirect.com/science/article/B6V8V-4PC3VCH-1/1/647b07afe63b8b088680059b2d67a5db
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Article provided by Elsevier in its journal Computational Statistics & Data Analysis.

Volume (Year): 52 (2008)
Issue (Month): 6 (February)
Pages: 2966-2989

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Handle: RePEc:eee:csdana:v:52:y:2008:i:6:p:2966-2989
Contact details of provider: Web page: http://www.elsevier.com/locate/csda

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  1. Nielsen, Morten Ørregaard & Frederiksen, Per, 2008. "Finite sample accuracy and choice of sampling frequency in integrated volatility estimation," Journal of Empirical Finance, Elsevier, vol. 15(2), pages 265-286, March.
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  9. MEDDAHI, Nour, 2001. "A Theoretical Comparison Between Integrated and Realized Volatilies," Cahiers de recherche 2001-26, Universite de Montreal, Departement de sciences economiques.
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  11. Barndorff-Nielsen, Ole E. & Hansen, Peter Reinhard & Lunde, Asger & Shephard, Neil, 2011. "Subsampling realised kernels," Journal of Econometrics, Elsevier, vol. 160(1), pages 204-219, January.
  12. Asger Lunde & Peter Reinhard Hansen, 2001. "A Forecast Comparison of Volatility Models: Does Anything Beat a GARCH(1,1)?," Working Papers 2001-04, Brown University, Department of Economics.
  13. Andersen, Torben G. & Bollerslev, Tim & Diebold, Francis X. & Ebens, Heiko, 2001. "The distribution of realized stock return volatility," Journal of Financial Economics, Elsevier, vol. 61(1), pages 43-76, July.
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